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Canadian Oil Sands issues 'Declaration of Independence' as takeover rhetoric heats up

A pedestrian is reflected in a Suncor Energy sign in Calgary, Feb. 1, 2010. (THE CANADIAN PRESS/Jeff McIntosh)

The Canadian Press
Published Monday, January 4, 2016 8:57AM EST
Last Updated Monday, January 4, 2016 2:38PM EST

CALGARY -- The hostile takeover battle between oilsands giant Suncor Energy and its target, Canadian Oil Sands, could be resolved soon, with both companies revving up their rhetoric ahead of a Friday deadline.

Suncor said Monday that it will move on to other opportunities if, by Friday evening, it does not receive "substantial support" for its $4.3-billion, all-stock offer.

Meanwhile, COS issued what it called a "declaration of independence," reiterating its view that shareholders are better off in the long run if the company continues on in its current form, despite continued weakness in crude prices.

Both companies are partners in the Syncrude oilsands mine north of Fort McMurray, Alta., -- COS with 37 per cent and Suncor with 12 per cent.

COS's main asset is its Syncrude stake, whereas Suncor (TSX:SU) is one of Canada's biggest energy names, with vast operations in the oilsands and a host of other refining and offshore holdings.

Because COS (TSX:COS) is so focused, it's more exposed than most to swings in crude prices -- both on the downside and the upside.

"You invested in Canadian Oil Sands for a pure-play exposure to oil prices and you have held your investment through unprecedented hard times in the energy sector," board chairman Don Lowry said in the public letter to shareholders, which also appeared in full-page newspaper ads.

"Now is the time to secure the future benefits of an independent Canadian Oil Sands."

COS's management and board of directors have slammed the Suncor offer as too low and opportunistic and accused it of fear mongering. Suncor needs at least two-thirds support from COS shareholders for the bid to go through.

In an interview, Suncor CEO Steve Williams said in order to justify keeping up the pursuit, Friday's tender results would need to be "close enough that I have a high degree of confidence the deal will close."

He said the prospects of a sweetened offer are "very low," noting ongoing operational glitches at Syncrude and a deterioration in crude prices since Suncor first took its offer to straight to shareholders in October -- from close to US$50 a barrel then to below US$40 a barrel now.

"If we were going to be making the bid today, it would not be at this level," Williams said.

And although Suncor has been expending a lot of time and effort chasing COS, it has a team screening a wide array of other potential deals, Williams said.

And if Suncor does end up walking away from its offer, the two companies would still have to work together at the Syncrude boardroom table.

"This is not personal. This is a business transaction. I certainly think it will make it a little bit more testing, but as far as Suncor is concerned, we've tried to keep this friendly," said Williams.

"Unfortunately, Canadian Oil Sands didn't want a friendly arrangement. Every time we've been doing anything, we've been requesting Canadian Oil Sands to call us. They've not returned any of those calls. But there's certainly not been any animosity on Suncor's part. . . . We're trying to do the best for Canadian Oil Sands shareholders and Suncor shareholders."